NEW DELHI: Bharti Group veteran Akhil Gupta and leading US private equity firm KKR will pick up a majority stake in an asset reconstruction company that will leverage the deal-making skills of the first and the deep pockets of the second in the hunt for ailing Indian firms that can be turned around. The two will buy into International Asset Reconstruction Co (IARC), which was set up by Tata Capital and HDFC Bank in 2002, in a multi-stage deal, said two people aware of the matter. The company has been engaged in acquiring non-performing loans from banks and unlocking their value.

This is possibly the first time that Gupta is making a personal investment outside the Bharti Group. “Under the proposed deal, both KKR and Gupta have committed to invest about Rs 350 crore through a structured transaction that will be invested over a period,” said one of those cited above. In the first stage, they will have a stake of between 26% and 30% in IARC, he said.

Gupta will be one of the sponsors of IARC in his personal capacity and will also join the board. “He will be an independent director on the board of IARC and will guide the company for striking a better deal using his financial acumen,” said the second person cited above. “KKR, which will be the largest shareholder in the asset reconstruction company, will also be one of the sponsors. Its nominee will be on the board of the company.” KKR has already approached the Foreign Investment Promotion Board (FIPB) seeking approval for the stake purchase. The Bharti Group declined to comment.

Gupta is currently chairman of Bharti Infratel, the tower company in which Bharti Airtel has a majority stake. He is also the vice-chairman of Bharti Enterprises, the holding company of the group. He didn’t comment. IARC’s current sponsors are HDFC Bank and Tata Capital Financial Services Ltd with holdings of 29.41% and 25.36%, respectively. “Following the completion of the transaction, all the existing shareholders’ stake will either be diluted to a small minority or they will be bought out by the incoming investors,” one of the persons said.

TWO NBFCS IN KKR FOLD

KKR already has two nonbanking finance companies (NBFCs) in its fold. One is engaged in conventional lending while the second focuses on real estate. IARC will be the third such entity in which KKR will have a high stake. In addition, the PE firm has a minority stake in Magma Fincorp Ltd, a Kolkata-based listed NBFC.

The asset reconstruction firm said it was looking to attract investors that can expand its horizons but declined to give any details. “IARC is raising capital from investors who have deep pockets and enormous domain experience that will help us in doing large deals, turn them around and take the company to the next level,” IARC Managing Director Birendra Kumar said.

“The transaction will help us in accessing a large pool of capital on a continuous basis that will be needed for IARC to fund the acquisition of stressed assets.” Indian lenders are groaning under a rising burden of bad loans. ET Intelligence Group data show that non-performing assets (NPAs) more than trebled to Rs 3.11 lakh crore in FY15 from Rs 92,515 crore in 2010-11. Another sharp jump is expected after the March fiscal year-end as many companies are struggling to meet repayment schedules.

KKR, which recently acquired a majority stake in niche home-grown investment bank Avendus Capital, will draw on the expertise in its various portfolio companies in term of access to capital, domain knowledge and international expertise to play a major role in the area of stressed assets, said one of the persons cited above.

Sponsored Stories

Subscribe to our Newsletters

After PSU banks, the government is likely to infuse capital in two chronically ill telecom PSUs BSNL and MTNL, and the Union Cabinet is likely to take a decision on 4G spectrum allocation to them by the third week of the current month after DoT places the note before it for consideration.

At a high-level meeting at the PMO late Tuesday, it was also decided that the two telcos will frame a Voluntary Retirement Scheme (VRS) to reduce their employee strength, which will be followed by a reduction in the retirement age to 58.